Pre-Approval Helps You Focus on the Properties That You Can Afford.
Reader Question: We are about to start the house hunting process to find a home. We haven't been pre-approved yet for a mortgage loan, but our REALTOR® said we need to be pre-approved before looking at homes WHY?
This is a question that I get asked many times. I know people are anxious to start looking at homes, but in reality, without a pre-approval you do not know how much home you can afford, types of loans available and how the lender determines your buying capability and level of risk.
Getting pre-approved for a home loan is a critical first step in the home buying process. There are more advantages to gaining pre-approval that you might think.
- You will save time by looking at homes in the right price range that you can actually afford instead of falling in love with a home that is out of reach.
- Working in the right price range will decrease the inventory of homes to fit into your parameters and you can spend more time reviewing what each home has to offer.
- Gain confidence and avoid disillusionment by minimizing anxiety and last-minute loan surprises that could disqualify you. Nothing is worse than telling family members you made an offer on a home, only to tell them weeks later it didn't work out.
- Increase your buying and negotiating power by showing the seller that a bank will give you a mortgage. This shows the seller you can act quickly if they accept your offer. It will also reassure them that their home is sold and they can take if off the market.
- You will be able to move into your new home quicker as the loan application process has been done. Appraisals can be ordered immediately along with title work. This may be a benefit to a seller who needs to move quickly and can't decide which offer to accept. Looking at it from the seller's perspective, the last thing the seller wants to do is accept an offer from someone who is not qualified to get a mortgage loan.
The pre-approval is the first step in the process. It occurs before you find a home. It focuses strictly on your basic factors. The lender will look at your paystubs, W-2's, bank statements, and credit report. It tells sellers and REALTORS® that you meet the basic requirements for a loan. The pre-approval shows the following details:
- The maximum loan amount you are eligible to receive
- Type of financing (Conventional, FHA, VA, USDA)
- Term for financing (15-, 20-, 20-, 30-year
- Expiration date of the pre-approval
- Down payment amount
- Any additional documents you may need to provide
I work with many lenders who offer exceptional service. There are other loan programs besides FHA and VA that you may be eligible for, so talking with a lender can give you more options. We have many good lenders in the Grand Junction area, and I can give you a list so you can call them and compare programs, rates and fees.
Perhaps you might also like:
Applying for a VA Home Loan
The Home Buying Process